We have been asked quite a bit recently on what a solid set of benchmarks for success look like. Key performance indicators (or KPIs) are the most commonly used measurement tools for organizational success and individual bonus compensation. While commonly used, they are also often ineffective without the right application.
The key to great KPIs comes down to specific measurement. There should be very little, if any, wiggle room on each performance indicator. Like SMART Goals, KPIs need to be achievable, strictly defined, and time stamped. At the end of the day, everyone that is looking at your company’s (or your individual) KPIs should be able to say, “Yes, that is a win” or “Nope, that one didn’t happen within the defined timeframe.” Here is one KPI example for a company’s annual revenue, both good and bad…..
(Good) Annual Revenue Goal – $400,000 to be reached in calendar year 2023. Staff member bonus = $5,000.
(Bad) Annual Revenue Goal – $400,000.
That last one had no defined timetable and there wasn’t a specific staff bonus tied to it.
Okay, how about a real life one from the Huddle Up Group…..
Jon (me) Travel Goal – Jon on the road in calendar year 2024 at least 10% less days than calendar year 2023 (2023 benchmark 100 days). Goal achievement for 2024 = 90 days or less. Staff member bonus = $1,000.
Basically the HUG one we shared above incentivizes our whole team to find ways operationally to allow me to be home more each year. As our son Brock continues to grow up and participate in sports and other things, I want to be home more. So we built that concept into the team’s annual goals. I have to be honest, putting things like this on paper so my goals both personally and professionally are transparent to the entire team, has shown to be a great connectivity point for us as a group.
At the end of the day, when it’s time to review KPIs with either your direct reports or to your boss, you should be able to walk into the meeting with your paper “graded.” There should be very little discussion about what was achieved and what wasn’t. Now there could be discussion about “other duties as assigned” that may not be in the original KPIs, however your core goals should be easy to evaluate.
Last item. All of your organization’s KPIs should be visible to everyone else in the company. Maybe not the dollar amounts for achieving each goal, but the goals themselves should be transparent for all to see. If one person knows the team goals and can see everyone’s individual goals, you have a much better chance of the group working together in the same direction.
Set your goals. Be specific. Know not only your goals, but those of your teammates.
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